The application of Benfordís Law in detecting accounting fraud in the Financial Sector

Abstract: This study aims to apply Benford's Law in detecting accounting fraud on the analysis of net income from listed financial companies, through years 2003-2012. Its main purpose is to confirm whether Benfordís Law is still valid after the 2007/2008 financial crisis. To measure the statistical significance, a Z test with a 95% confidence interval was employed. With the exception of a sample showing positive net income after 2008, for the digits 1, 6 and 9, it was confirmed that our sample follows Benford's Law which demonstrates the effect of the 2007/2008 crises on financial companies.